(Dow Jones) There are many reasons why one client might have a much brighter retirement outlook than another, or vice versa. Maybe one sets aside more each month, started saving younger, or chose investments that fared better in the downturn. But to what degree does their 401(k) plan itself make a difference?
A lot, says Mike Alfred, chief executive of San Diego-based 401(k) rating company BrightScope, which keeps a database of information on some 30,000 retirement plans.
For instance, when you compare Google Inc.'s (GOOG) retirement--plan rank of 84 to, say, the 67 earned by Procter & Gamble Co.'s (PG) profit-sharing plan, you might wonder where your own plan stands--and why the variation?
BrightScope's rankings are based on total plan cost, the size of the company match, the quality of the investment choices offered, how many employees participate and how much they save, among other things.
"The biggest problem is fees," Alfred said.
There's a "huge divergence, particularly at the small end of the market," he said. "Coupled very closely with that is the fundamental lack of transparency and disclosures. ...That's why you see two companies in the same industry, with the same demographics--and one has fees twice as high," he said.
Others agreed there are wide differences in the types of plans companies offer their employees, and how much those plans cost.
"There clearly is variation within the 401(k) marketplace," said Pam Hess, Chicago-based director of retirement research at Hewitt Associates. "You find more of it on the small end of the market, where there's less leverage for an individual employer than at the large end of the market."
"If you're a big company, the market's pretty competitive for you because you can negotiate, and there are fixed costs that can be spread over more people and you have billions of dollars of assets potentially to use to get lower fund costs," Hess said.
Of course, the outlook for any one worker to save enough of a nest egg to last in retirement will depend on many factors--not just the 401(k) plan--including how much that person saves, the age at which they retire, and the return their money earns.